Reaching Across Borders: U.S. – EU Regulatory Cooperation in Practice

Daniel R. Pérez

by Daniel R. Pérez, Policy Analyst

September 20, 2016

The U.S. and EU continue to improve outcomes for their citizens through successful regulatory cooperation despite the continued political rhetoric against international trade. On Thursday, September 15, 2016, the George Washington University Regulatory Studies Center co-hosted a conference with the EU Delegation to the United States on “U.S.-EU International Regulatory Cooperation in Practice.” The conference showcased the Center’s research, but it also brought together senior officials from the European Commission and U.S. government, experts and practitioners in the areas of trade and regulatory cooperation, industry stakeholders, and consumer interest groups. Several presenters made it clear that there is actually a great deal of progress in this area—much more than may be visible at first glance.

Regulatory cooperation is a central component of the Transatlantic Trade and Investment Partnership (TTIP). This trade deal aims to increase economic growth by reducing lingering barriers to international trade and investment between the U.S. and the EU. Reducing the amount of unnecessary regulatory differences between trade partners can reduce costs, make it easier for companies to comply with regulations, and improve regulatory outcomes for consumers; observers worry that none of these benefits can be achieved until we finalize a trade deal. Our conference on regulatory cooperation suggests that isn’t completely true.

Participants highlighted several important points including the fact that regulatory agencies in Europe, Canada and the U.S. have had a long history of successfully engaging their counterparts even in the absence of formal, prescriptive mechanisms such as trade deals. Other important takeaways include:

  • Regulatory cooperation often happens organically, particularly in areas where it is most needed. The U.S. Federal Aviation Administration, for example, has successfully cooperated for decades with the European Aviation Safety Agency on regulatory issues to ensure the safety of international air travel. The U.S. Food and Drug Administration has similarly engaged its European counterparts on consumer safety issues including the regulation of food and drugs.
  • Success does not hinge on complete harmonization of regulatory approaches. Both the U.S. and the EU contain sophisticated regulatory systems, but they often diverge in their respective methods for approaching issues of safety and compliance. However, regulatory cooperation between countries has resulted in mutual recognition across several areas. This allows governments to maintain their desired regulatory approach while recognizing that their counterparts likely achieve the same level of consumer protection albeit through different methods. Regulatory cooperation does not require trade partners to have identical approaches.
  • Multilateral fora and institutions exist which create an important space for dialogue between countries. Even though budgetary constraints can often limit the international activity of agencies, institutions such as the Organization for Economic Cooperation and Development often work to facilitate cooperation between regulators.

Best Practices

The conference also highlighted several best practices for engaging in cooperation with foreign counterparts including:

  • Early sharing of data between regulators. More data gives agencies a better chance at creating clear, performance-based regulations that facilitate innovation while maintaining or even improving the safety they provide. Coordination of data also improves the ability of enforcement actions such as product recalls and consumer alerts.
  • More work should be done to demonstrate the benefits of cooperation. Regulatory cooperation requires trust, and while incremental successes help expand the willingness of engaging in regulatory cooperation, agencies and experts can do more to measure and showcase the benefits of cooperation. It is important to showcase the value that cooperation achieves including improvements in consumer protections or reductions in the cost of doing business internationally.
  • Leadership matters. Several of the most successful exchanges between regulators are the result of innovative leadership at the agency level. These actions include foreign offices and foreign exchange programs which can develop an agency’s knowledge base of regulatory approaches used by their foreign counterparts. However, leadership is also important at the international level. When countries with developed regulatory, compliance, and enforcement regimes agree on a best practices it sets the standard for other trade partners. An example of this is the U.S. Consumer Product Safety Commission and the European Commission working jointly to conduct safety seminars in China on clothing, toys, and electrical products. If consumer safety is a concern, engaging other trade partners helps diffuse Good Regulatory Practices, globally.
  • Advanced notice is important for transparency and public participation. A system that provides advanced notice of regulations likely to affect international trade and investment ensures transparency and can improve regulatory outcomes. Outside input during the rulemaking process can provide valuable feedback to regulators of unintended consequences that were not previously considered or of existing international standards that should be considered.

Limits

Dialogue between trade partners and regulators also highlighted significant differences that may constrain the ability to cooperate.

  • Confidential Business Information. The likelihood that agencies will actively engage in sharing data may be limited by their inability to assure their counterparts that they can safeguard confidential business information. This ability to protect CBI may differ across agencies due to the particular statutory authority that authorizes their actions or differences in the level of control that governments are able to exercise over their respective agencies (e.g., executive vs. independent agencies in the U.S.).
  • Existing differences may be more difficult to bridge. Existing rules often have vested interests who object to change and fight to maintain the status quo. It may be too costly to expend time and energy in targeting these types of rules—effort that may be more efficiently spent cooperating in less problematic areas.

Altogether, the dialogue between experts, practitioners, and consumer groups indicates that both the U.S. and the EU have made a great deal of progress on issues of regulatory cooperation. Cooperation is working at several levels and in many forms to improve regulatory outcomes and reduce the cost of doing business internationally. Agencies in both jurisdictions have a long history of engaging their counterparts in successful cooperation while ensuring the safety of the public. Although regulatory cooperation is often thought of as very high-level actions—perhaps only achievable through the negotiation of complex trade agreements—regulators, industry groups, and the public all continue to provide input and work towards achieving more benefits from cooperation and trade.